The financial stability of the banking sector is a prerequisite for a thriving and stable economy. Against this backdrop, this article investigates the relationship between bank profitability and the financial stability of the banks by explicitly capturing the role of bank size, institutional quality and market concentration. A sample of 776 banks operating in Brazil, Russia, India, China and South Africa over the period 2005–2020 are examined using panel regression and System GMM. Our findings support this axiom, and we conclude that bank profitability plays a critical role in determining the stability of the financial system. Our results are consistent across alternate measures of stability (VaR and ∇CoVaR), albeit insignificant. Furthermore, the results support the existence of the concentration–stability hypothesis in the banking industry of BRICS nations. The findings also indicate that non-interest income and NPA have a negative impact on stability, whereas institutional quality plays a significant role in maintaining the stability of the banking industry in these emerging economies. This article tries to provide empirical research investigating the association of the financial stability of banks with profitability, non-interest income ratio, market concentration and institutional quality.
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